Widespread Automation Defeat TOU Benefits

This article published in the July 2023 Newsletter of the Global Smart Energy Federation.

Since October 2018, I have written several articles on energy efficiency and prudent load management. Here, I examine why too much automation actually works against an efficient distribution system and TOU benefits.

All monopolistic services (electricity, gas, water, transportation) are regulated on cost recovery with limited room for performance and no room for opportunistic profits. Such systems are designed for maximum output for the least capital invested, implying an ideal “flattened” demand profile (with statistical usage diversity) to achieve its ROI.

Rarely does this “flattened” demand profile apply 24/7/365 for any industry and more so for the electric utilities. There are up/down patterns based on seasons, daily weather, holidays/festivities and even major sports events, causing a variation in maximum-demand profiles in a given year. It is not just the peaks themselves but also the steepness of the ramp around such peaks. Better diversity in loads and consumer segments, leads to better load management. Over the decades a few key factors have been defined to ensure load-generation balance and reserve capacities. These are simplified below:

1.????Load Factor: The ratio of the average load divided by the maximum (or peak) load in a given time period (ratio of load met to the maximum in that period). A high value (maximum 1.0) denotes efficient use. Improving load factor requires peak demand reduction (shaving/ displacement/ flattening).

2.????Coincident Peak Demand: A user’s demand during the period in which systemwide electricity demand is already at its highest (a user’s direct impact in raising the system peak even higher). Lowering coincident peak, requires dispersing the coincident demand by time shifting (often by just a few hours).

3.????Load Ramps: Large “stacked-demand” that gets turned on at the same time or in very short succession (say a 15-minute interval) within an area. These are influenced by collective daily routines and appliances.

Electricity plays a vital part in our everyday life. Its use is taken for granted with just a flick of a switch. There is little or no public awareness what goes on behind to enable that power. Twenty years ago, that switch was operated manually by the consumer. Today, it is automated extensively based on our personal lifestyle choices (lights, heat/cool, hot water, EV charging, etc.). We are now even further removed from the consequences of our actions. Millions of such small inconsequential automated actions, is where the trouble lies for the grid. Some key transformations and their impact are examined below:

1.????Maximizing TOU Tariff: A clock-based differentiated daily tariff (peak, mid, low) attracts a clock-based consumer action to save money. To lower energy bills most consumers install timers (dishwasher, clothes dryers, EV charging). These collective timers produce a steeper load ramp on the system.

2.????Nightly Comfort: In hot and humid climatic jurisdictions, the use of air-conditioners at night is a much-needed family comfort. Most residences turn them at (say) 10pm. In Asia, Middle East, Africa, and Caribbean countries, this creates a night-time peak as millions of these residential air-conditioners are turned on.

3.????Daytime Routines: Morning routines have little wiggle room (schooling, going to work, bathing, cooking, etc. The same occurs in the evening. In an neighborhood of all-electric homes, this results in a steeper load ramp.

4.????The Electrification of Everything: ?Total electrification to combat climate change (heat-pumps, electric hot-water tank, electric cooking range, electric dryers, and EV) requires uprating residential power supply (e.g. 100A to 200A). This has a higher systems impact during collective usage.

Automation makes a consumer’s life simple. Inexpensive Wi-Fi-enabled devices (both on-off and raise-lower controllers) can control all appliances. It allows for the maximization of human comfort value while driving energy (TOU) economics. However, when the clock becomes the beacon to extract value, so do maximization. Human psychology is to set such timers on the “top” or “bottom” of the hour (also mimicked in TOU tariff). ?A massive clock-based automatic initiation has an opposite effect on load diversity counted on by utilities in its network design. It also creates steeper load ramps.

As the world adopts TOU, the falling costs of IoT automation will take away all time-variation benefits (load factor) that utilities count on. The “metered energy” may indeed turn into an “unmetered capacity” problem for the last mile distribution network, requiring a demand meter being installed in residences (currently only in large commercial and industrial accounts). At the extreme, this has the potential for (a) larger spinning reserve margins; (b) overbuilding of the distribution network capacity; and (c) a lower ROI on the capital invested. A classic case for rate increase.

So, this begs the question whether massive automation in society is for the common good (certainly yes, for the individual) and whether the current energy rates and simplistic TOU price signals is still the best option. The answer is dicey. The solutions for such an eventuality perhaps lie in regulatory reforms in the following areas

1.????Installing Residential Demand Meters: This would be a prudent but a difficult step for the regulators as it defeats the objective of TOU to some extent. Putting capacity constraints on an energy incentive rate platform is confusing to the customer.

2.????Time-Stagger the TOU: Instead of a standard TOU rates and times for all, initiate a time-staggered TOU, duly offset by 15-minute delays in neighboring areas. The maximum time stagger would be 15-45 minutes. However, this could be very confusing for the average residential customer.

3.????Demand-Focused Energy Conservation: Initiate a demand-focused conservation program that would result in lower overall load (KW) as opposed to saving just energy (KWh). Such focus would be on the large residential appliances

4.????Load Limiter Control/Alert: This would involve each residence being provided with a load-limit control panel which would connect all the major discretionary large appliances (dryers, air-conditioners, hot-water tanks, EV chargers). The controller will stagger on-off times so as not to exceed overall residential capacity.

The above solutions are not cheap nor easy to implement, but the allowing unbounded ubiquitous automation (particularly in a TOU setting) will also have its upward rate spiraling consequences. There are no easy answers but choices will have to be made and programs initiated accordingly. TOU and Net Zero policies together with drive for “the electrification of everything” will likely clash with the widespread adoption of cheap IoT enabled automation by consumers. The outcome may not be palatable to both the utilities (managing such distribution network) and the rate-payer (who will see rate increases).

What was a good thing to 20+ years ago to initiate a market facing TOU rate structure, may indeed turn out to be the Achilles heel in the next twenty years as it is widely adopted with automation. We need to rethink current energy regulations and incentive tariff structures.